Ottawa set for string of tiny surpluses as Tories clean out fiscal cupboard

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OTTAWA — The Harper government's long string of deficits is about to end, Finance Minister Joe Oliver confirmed Wednesday, setting up a political battle over what to do with a string of expected annual surpluses.

Oliver published the annual fiscal and economic update Wednesday, that confirmed a relatively small $2.9-billion deficit this year, followed by a surplus of $1.9 billion next year. There were no new tax or spending initiatives in the update.

"We will fulfil our commitment to Canadians to balance the budget in 2015," Oliver said. "This is a remarkable achievement, when so many other countries are still locked in deep deficits."

The government may even balance the budget this year. That's because the government had set aside $3 billion for "contingencies" — a disaster like the Calgary floods, perhaps — and if there are no emergencies between now and the end of the fiscal year on March 31, that $3 billion will be used to wipe out the deficit.

In any event, the Harper government is sending a clear message to voters: Conservatives will deliver a heavy dose of tax reductions, a dollop of new spending in the form of cash to parents, and a sprinkling of debt reduction to get rid of as much surplus revenue as possible.

"Conservatives know that for a more affordable life, Canadians need a more affordable tax burden," Oliver told a business crowd in Toronto. "There is still too much money in the hands of bureaucracy, and not enough money in the pockets of Canadian families. Parents have a lot to pay for. Our Conservative government believes in putting more money into the hands of those who care about their children most -- mom and dad."

With this mixed approach, the Conservatives appear to be trying to clean out the fiscal cupboard well ahead of next fall's election, daring the New Democrats and Liberals to come up with a new mix that may not be so popular with voters. Both the NDP and the Liberals, for instance, oppose the income-splitting proposal, arguing it benefits only rich Canadians.

Mulcair was cagey when asked if he would reverse this tax break if elected, but told reporters, "Don't be surprised if the NDP tries to come up with a way that those sums are more evenly spread out amongst all Canadians, instead of going to the richest 14%."

Trudeau has already committed to reversing the income split tax cut.

"This particular fiscal update highlights that this government is more worried about getting re-elected than about fairness, because they're giving a massive tax break to 15% of Canadians at the cost of the hard work of 85% of Canadians who get nothing from income splitting," Trudeau told reporters in Vancouver.

The Conservatives argue that their income-splitting plan is one part of their package aimed at helping families. Income-splitting allows two-income families to offload up to $50,000 in taxable income on the lower-income spouse but caps a non-refundable tax credit at $2,000. But every parent — single or otherwise — would qualify for a monthly cheque from the enriched child care benefit for each child under the age of 18.

Mulcair also repeated his vow that the NDP would not touch personal income taxes but would boost corporate income taxes.

"We will make sure Canadian corporations start paying their fair share of taxes," Mulcair said.

Ottawa's overall revenues this year will be $277.6 billion, down about $500 million than expected last spring as a result of declining oil prices. The government will spend $280.5 billion this year, of which, $27.7 billion goes to pay interest on the $615.8 billion worth of public debt.